Euro-zone property prospects are improving

Euro-zone property markets ended the year on strong note, with many seeing a material rise in investment market activity. Small falls in yields were also more common than not. Our economic forecasts are little changed from our previous Analyst. As such, they imply that the wider economic backdrop will typically be too weak to generate a rapid recovery in rental value growth this year. Nevertheless, we have revised up our forecasts in a number of markets to reflect the growing potential for a modest rise in capital values this year, as yields edge down in response to improving investor sentiment. A 3% rise in capital values this year will be the start of a sustained upward trend which, over the next five years, will take euro-zone all-property values back to within touching distance of their 2008 high.